THIRD DIVISION

[G.R. No. 202364. August 30, 2017.]

ARTURO C. CALUBAD , petitioner, vs. RICARCEN DEVELOPMENT

CORPORATION respondent.
CORPORATION,

DECISION

LEONEN J :
LEONEN, p

When a corporation intentionally or negligently clothes its agent with apparent

authority to act in its behalf, it is estopped from denying its agent's apparent authority
as to innocent third parties who dealt with this agent in good faith. 1
This resolves the Petition for Review on Certiorari 2 led by petitioner Arturo C.
Calubad (Calubad), assailing the January 25, 2012 Decision 3 and June 20, 2012
Resolution 4 of the Court of Appeals in CA-G.R. CV No. 93185, which upheld the January
6, 2009 Decision 5 of Branch 218, Regional Trial Court, Quezon City in Civil Case No. Q-
03-50584.
Respondent Ricarcen Development Corporation (Ricarcen) was a domestic
corporation engaged in renting out real estate. It was the registered owner of a parcel
of land located at 53 Linaw St., Sta. Mesa Heights, Quezon City. 6 This parcel of land
was covered by Transfer Certi cate of Title (TCT) No. RT-84937 (166018) 7 and was
subdivided into two (2) lots. 8
Ricarcen was a family corporation. Marilyn R. Soliman (Marilyn) was its president
from 2001 to August 2003. The other members of the board of directors during that
time were Marilyn's mother, Erlinda Villanueva (Erlinda), her brother, Josefelix R.
Villanueva (Josefelix), her aunt, Maura Rico, and her sisters, Ma. Elizabeth V. Chamorro
(Elizabeth), Ma. Theresa R. Villanueva, and Annabelle R. Villanueva. 9
On October 15, 2001, Marilyn, acting on Ricarcen's behalf as its president, took
out a P4,000,000.00 loan from Calubad. This loan was secured by a real estate
mortgage over Ricarcen's Quezon City property covered by TCT No. RT 84937
(166018), as evidenced by a Deed of Real Estate Mortgage. 1 0
The terms of the loan provided that Ricarcen would pay the P4,000,000.00 loan
within a period of six (6) months with "a compounded interest at the rate of FIVE (5%)
percent for the rst month and THREE (3%) percent for [the] succeeding months and a
penalty of ONE (1%) percent per month on the principal sum in case of delay in
payment." 1 1 The terms of the loan also provided that the rst monthly interest
payment of P200,000.00 would be deducted from the loan proceeds. 1 2
On December 6, 2001, Ricarcen, through Marilyn, and Calubad amended and
increased the loan to P5,000,000.00 in the Amendment of Deed of Mortgage
(Additional Loan of P1,000,000.00), 1 3 with the same property used as security and
under the same terms and conditions as those of the original Deed of Real Estate
Mortgage.
On May 8, 2002, Ricarcen, again acting through Marilyn, took out an additional
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 loan of P2,000,000.00 from Calubad, as evidenced by the executed Second
Amendment of Deed of Mortgage (Additional Loan of P2,000,000.00). 1 4
To prove her authority to execute the three (3) mortgage contracts in Ricarcen's
behalf, Marilyn presented Calubad with a Board Resolution dated October 15, 2001. 1 5
This Resolution empowered her to borrow money and use the Quezon City property
covered by TCT No. RT-84937 (166018) as collateral for the loans. Marilyn also
presented two (2) Secretary's Certificates dated December 6, 2001 1 6 and May 8, 2002,
1 7 executed by Marilyn's sister and Ricarcen's corporate secretary, Elizabeth.

Sometime in 2003, after Ricarcen failed to pay its loan, Calubad initiated
extrajudicial foreclosure proceedings on the real estate mortgage. The auction sale
was set on March 19, 2003. 1 8
Calubad was the highest bidder during the scheduled auction sale; thus, on
March 27, 2003, he was issued a Certificate of Sale. 1 9
On April 10, 2003, the Certi cate of Sale was annotated on TCT No. RT-84937
(166018). 2 0
Ricarcen claimed that it only learned of Marilyn's transactions with Calubad
sometime in July 2003. 2 1
Upon con rming that the Quezon City property had indeed been mortgaged,
foreclosed, and sold to Calubad as a result of Marilyn's actions, Ricarcen's board of
directors removed her as president and appointed Josefelix as its new president.
Josefelix was also authorized to initiate the necessary court actions to protect
Ricarcen's interests over the Quezon City property. 2 2
On September 9, 2003, Ricarcen led its Complaint for Annulment of Real Estate
Mortgage and Extrajudicial Foreclosure of Mortgage and Sale with Damages against
Marilyn, Calubad, and employees of the Registry of Deeds of Quezon City and of the
Regional Trial Court of Quezon City. 2 3
On October 9, 2003, the Clerk of Court and Ex-Officio Sheriff of the Regional Trial
Court of Quezon City, Atty. Mercedes S. Gatmaytan, was discharged as party-
defendant. 2 4
In its Complaint, Ricarcen claimed that it never authorized its former president
Marilyn to obtain loans from Calubad or use the Quezon City property as collateral for
the loans. 2 5
On the other hand, Calubad insisted that the incidents which led to the
foreclosure and sale of the Quezon City property were all above board and were not
marked with irregularity. Furthermore, he asserted that he exercised the necessary
diligence required under the circumstances by requiring Marilyn to submit the
necessary documents to prove her authority from Ricarcen. Calubad likewise argued
that even if Ricarcen did not authorize Marilyn, it was already estopped from denying
her authority since the loan proceeds had been released and Ricarcen had bene ted
from them. 2 6
For their part, spouses Marilyn and Napoleon Soliman denied any knowledge of
or participation in the allegedly falsi ed documents and claimed that the falsi cation
was perpetrated by their broker, Nena Ico, and Calubad's broker, a certain Malou,
without their permission. 2 7
On January 6, 2009, the Regional Trial Court 2 8 granted Ricarcen's complaint and
annulled the mortgage contracts, extrajudicial foreclosure, and sale by public auction.
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 The Regional Trial Court held that Marilyn failed to present a special power of
attorney as evidence of her authority from Ricarcen. The lack of a special power of
attorney should have been enough for Calubad to be put on guard and to require further
evidence of Marilyn's authority from Ricarcen. 2 9
The Regional Trial Court also ruled that the Board Resolution and Secretary's
Certi cates, which were supposedly executed by Ricarcen's Board of Directors, had
been unmasked to be merely fabricated. Furthermore, Atty. William S. Merginio, who
purportedly notarized the Board Resolution and Secretary's Certi cates, denied that he
notarized those documents since they did not appear in his notarial register. 3 0
The Regional Trial Court then dismissed the complaint against the Registry of
Deeds employees for Ricarcen's failure to show any irregularity in the performance of
their duties. 3 1 The dispositive portion of the Regional Trial Court Decision read:
WHEREFORE,
WHEREFORE premises considered, judgment is hereby rendered in
favor of plaintiff Ricarcen Development Corporation and further:
1. Declaring as null and void the following:
• Deed of Real Estate Mortgage dated 15 October 2001;
• Amendment of Real Estate Mortgage dated 06 December
2001;
• Second Amendment of Deed of Mortgage dated 08 May 2002;
and
• Extrajudicial Foreclosure of Mortgage and Sale by public
auction in favor of Arturo Calubad[;]
2. Canceling TCT No. 261881 in the name of Arturo Calubad and
reinstating TCT No. RT-84937 (166018), both by the Regist[ry] of
Deeds of Quezon City; and
3. Ordering defendants spouses Solimans and Calubad to pay jointly
and severally damages in the amount of Two Hundred Fifty
Thousand Pesos (Php250,000.00) as attorney's fees and costs of
litigation.
SO ORDERED. 3 2
Only Calubad appealed the Regional Trial Court Decision to the Court of Appeals.
On January 25, 2012, the Court of Appeals dismissed Calubad's appeal and
a rmed the Regional Trial Court Decision. The Court of Appeals emphasized that the
rule on the presumption of validity of a notarized board resolution and of a secretary's
certificate is not absolute and may be validly overcome by contrary evidence; 3 3 thus:
In order to defeat the presumption, it is incumbent upon RICARCEN to prove
"with clear, convincing, strong and irrefutable proof" that the board resolution
and secretary's certi cates purportedly authorizing Marilyn Soliman to secure a
loan and mortgage the subject property in behalf of the corporation are, in fact,
invalid.
In the case at bench, RICARCEN was able to discharge this burden. The
truth of the contents of the board resolution and secretary's certi cates relied
upon by Calubad had been overthrown by the records of this case which clearly
show that such documents were not in fact executed by the board of directors
of RICARCEN, and are, therefore, fabricated. 3 4
The Court of Appeals also disregarded Calubad's argument that Ricarcen was
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 guilty of laches, ruling that Ricarcen's board of directors only found out about the
mortgage contracts in July 2003, when they received a copy of the notice of
foreclosure of mortgage. Upon verifying with the Registry of Deeds of Quezon City,
Ricarcen took immediate action by removing Marilyn as president and instituting a case
for annulment and cancellation of mortgage against Calubad and Marilyn. 3 5
The Court of Appeals likewise set aside Calubad's argument that Ricarcen was
estopped from denying the contracts. The Court of Appeals held that since Ricarcen
did not know about the existence of the contracts of mortgage between Caluband and
Marilyn, it could not have rati ed them or knowingly accepted any bene ts from the
loan proceeds. 3 6
The dispositive portion of the Court of Appeals Decision read:
WHEREFORE,
WHEREFORE in view of the foregoing premises, the instant appeal is
hereby ordered DISMISSED , and the appealed decision is AFFIRMED in toto .
SO ORDERED . 3 7 (Emphasis in the original)
On August 10, 2012, Calubad filed his Petition 3 8 before this Court.
Petitioner claims that Ricarcen is barred by estoppel from denying Marilyn's
authority to enter into a contract of loan and mortgage with Calubad for several
reasons. He argues that Ricarcen clothed Marilyn in apparent authority to act in its
behalf, 3 9 that it bene ted from the loans proceeds, 4 0 and that it impliedly agreed to
the mortgage loans by paying the monthly interest payments. 4 1
Petitioner avers that Elizabeth executed four (4) separate documents which gave
Marilyn the authority to secure loans, use the Quezon City property as collateral, and
execute all documents needed for those purposes. 4 2
The four (4) documents which petitioner claimed to have proved Marilyn's
authority to act in behalf of Ricarcen were:
a) Board Resolution dated October 15, 2001, which read:
RESOLVED, AS IT IS HEREBY RESOLVED, that the President
MARILYN R. SOLIMAN, is the authorized signatory of the
corporation to transact any and all documents necessary for the
purpose of securing monetary loan using a parcel of land owned
by the corporation located at No. 53 Linaw St., Quezon City
covered by TCT No. RT-84937 (166018) of the Registry of Deeds
of [Quezon City] with a total area of 840 square meters more or
less, as collateral/security.
RESOLVED FURTHER, AS IT IS HEREBY RESOLVED, that she is
authorized to sign all documents required for the monetary loan
for and in behalf of the corporation. 4 3
b) Secretary's Certificate dated October 15, 2001, which read:
BE IT RESOLVED, AS IT IS HEREBY RESOLVED, that the
corporation will borrow from ARTURO CALUBAD, Filipino, of legal
age, and residing at 89 East Maya Philam Homes Village, Quezon
City.
FURTHERMORE, BE IT RESOLVED, that the corporation is
authorizing MARILYN R. SOLIMAN, President, to sign for and in
behalf of the corporation. 4 4
c) Secretary's Certificate dated December 6, 2001, which read:
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 RESOLVED, as it is hereby resolved that the President,
MARILYN R. SOLIMAN, is hereby authorized to secure
ADDITIONAL LOAN OF [P]1,000,000.00 from MR. ARTURO
CALUBAD, using as collateral two (2) parcels of land with the
improvements existing thereon, situated in Quezon City, Metro
Manila, covered and embraced by Transfer Certi cate of Title No.
RT-84937 (166018) of the Registry of Deeds of Quezon City, Metro
Manila, and in such amount that she deems it most proper and
beneficial to the corporation.
RESOLVED FINALLY, that the President is hereby
authorized to sign Amendment of Deed of Real Estate Mortgage,
Acknowledgment Receipt and other pertinent documents and get
and receive the loan either in cash or check/s with any bank
lawfully doing business in the Philippines for and in behalf of the
corporation. 4 5
d) Secretary's Certificate dated May 8, 2002, which read:
BE IT RESOLVED, AS IT IS HEREBY RESOLVED, that the
corporation will secure additional monetary loan of P2,000,000.00
from ARTURO CALUBAD, Filipino, of legal age, and residing at 89
East Maya Philam Homes Village, Quezon City, using a parcel of
land owned by the corporation located at No. 53 Linaw St.,
Quezon City covered by TCT No. RT-84937 (166018) of the
Registry of Deeds of [Quezon City] with a total area of 840 square
meters more or less, as collateral/security.
FURTHERMORE, BE IT RESOLVED, that the corporation is
authorizing MARILYN R. SOLIMAN, President, to sign for and in
behalf of the corporation. 4 6
All these four (4) documents were signed by Elizabeth in her capacity as
Ricarcen's corporate secretary.
Elizabeth later on denied signing any of these four (4) documents cited by
petitioner, saying that she regularly signed blank documents and left them with her
sister Marilyn. She opined that the Board Resolution and Secretary's Certi cates, which
purportedly gave Marilyn the authority to transact with petitioner in Ricarcen's behalf,
might have been some of the blank documents she had earlier signed. 4 7
However, petitioner asserts that the fact that Elizabeth entrusted signed, blank
documents to Marilyn proved that Ricarcen authorized her to secure loans and use its
properties as collateral for the loans. 4 8
Petitioner also points out that Marilyn had possession of the owner's duplicate
copy of TCT No. RT-84937 (166018), and thus, he had no reason but to believe that she
was authorized by Ricarcen to deal and transact in its behalf. 4 9
Additionally, the loan proceeds were issued through checks payable to Ricarcen,
which were deposited in its bank account and were cleared. As further evidence of
Ricarcen's receipt of the loan proceeds, petitioner presented several checks drawn and
issued by Elizabeth or Erlinda, jointly with Marilyn, representing loan payments. 5 0
Petitioner also presented several withdrawal slips signed by either Elizabeth or
Erlinda, jointly with Marilyn, authorizing a certain Lilydale Ombina to repeatedly
withdraw from Ricarcen's bank account. 5 1
Petitioner likewise presented several checks drawn from Ricarcen's bank
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 account, issued by Elizabeth or Erlinda, jointly with Marilyn, payable to third persons or
to cash. 5 2 Petitioner maintains that the foregoing evidence is indubitable proof that the
loan proceeds have been used by Ricarcen. 5 3
Petitioner then claims that Ricarcen, in a check drawn and issued by Erlinda and
Marilyn, paid the 3% monthly interest for the rst loan of P4,000,000.00. This bolstered
his belief that Ricarcen and its o cers knew of and approved that loan, and induced
him to grant Ricarcen, through Marilyn, additional loans. 5 4
Petitioner asserts that the acts of Elizabeth and Erlinda are equivalent to clothing
Marilyn with apparent authority to deal with him and use the Quezon City property as
collateral:
Their acts are also a manifestation of their acquiescence to Marilyn
Soliman's availment of loans and execution of real estate mortgage with
petitioner.
Thus, even if Marilyn Soliman had acted without or in excess of her
actual authority, if she acted within the scope of an apparent authority with
which [Ricarcen] has clothed her by holding her out or permitting her to appear
as having such authority, [Ricarcen] is bound thereby in favor of petitioner who
in good faith relied on such apparent authority. 5 5
On November 12, 2012, this Court required Ricarcen to comment on the Petition.
56

On February 4, 2013, Ricarcen led its Comment, 5 7 where it claims that the
Petition raised questions of fact, which are not proper in a petition for review on
certiorari. It also avers that petitioner failed to raise any exceptional circumstances, and
thus, should be dismissed outright. 5 8
Ricarcen asserts that while the documents it purportedly issued enjoy the
presumption of validity, this presumption is not absolute and it has shown convincing
evidence as to the invalidity of the Board Resolution and of the Secretary's Certi cates.
59

Ricarcen points out that Marilyn clearly acted without authority when she entered
into a loan and mortgage agreement with petitioner. Being void, the contracts of loan
and mortgage can never be ratified. 6 0
Ricarcen also denied that it was guilty of laches since it only learned about
Marilyn's loan with Calubad in July 2003, when it received a notice of foreclosure. Upon
learning of the extrajudicial foreclosure and sale by public auction, it immediately
removed Marilyn as president and authorized Josefelix to le the necessary actions to
protect Ricarcen's interests. 6 1
Ricarcen likewise claims that it cannot be held guilty of estoppel in pais since it
never induced nor led petitioner to believe that Marilyn was duly authorized to take out
a loan and to mortgage the Quezon City property as collateral. Additionally, "it did not
knowingly accept any benefit" from the loan proceeds. 6 2
Ricarcen declares that petitioner either connived with Marilyn or, at the very least,
failed to exercise reasonable diligence and prudence in ascertaining Marilyn's
supposed agency from Ricarcen. 6 3
On March 11, 2013, this Court noted Ricarcen's Comment and required Calubad
to reply to the Comment. 6 4
On May 9, 2013, Calubad led his Reply, 65 where he denied that he raised purely
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 questions of fact in his Petition since the issue raised was "the law and jurisprudence
applicable to the facts of this case, or whether the conclusion drawn by the Court of
Appeals from those facts is correct or not." 6 6
Petitioner likewise claims that the ndings of the Court of Appeals were
contradicted by the evidence on record, and hence, were not conclusive or binding on
the parties. 6 7
On April 6, 2016, this Court noted Calubad's motion for early decision dated
March 21, 2016. 6 8
The only issue presented for this Court's resolution is whether or not Ricarcen
Development Corporation is estopped from denying or disowning the authority of
Marilyn R. Soliman, its former President, from entering into a contract of loan and
mortgage with Arturo C. Calubad.
The petition is meritorious.

The Rules of Court categorically state that a review of appeals led before this
Court is "not a matter of right, but of sound judicial discretion." 6 9 The Rules of Court
further require that only questions of law should be raised in petitions led under Rule
45 7 0 since factual questions are not the proper subject of an appeal by certiorari. It is
not this Court's function to analyze or weigh all over again evidence that has already
been considered in the lower courts. 7 1
However, these rules admit exceptions. Medina v. Mayor Asistio, Jr. 7 2 listed
down 10 recognized exceptions:
(1) When the conclusion is a nding grounded entirely on speculation,
surmises or conjectures . . . ; (2) When the inference made is manifestly
mistaken, absurd or impossible . . . ; (3) Where there is a grave abuse of
discretion . . . ; (4) When the judgment is based on a misapprehension of facts . .
. ; (5) When the ndings of fact are con icting . . . ; (6) When the Court of
Appeals, in making its ndings, went beyond the issues of the case and the
same is contrary to the admissions of both appellant and appellee . . .; (7) The
ndings of the Court of Appeals are contrary to those of the trial court . . . ; (8)
When the ndings of fact are conclusions without citation of speci c evidence
on which they are based . . . ; (9) When the facts set forth in the petition as well
as in the petitioners' main and reply briefs are not disputed by the respondents .
. . ; and (10) The nding of fact of the Court of Appeals is premised on the
supposed absence of evidence and is contradicted by the evidence on record . . .
73

Pascual v. Burgos 7 4 instructed that parties must demonstrate by convincing

evidence that the case clearly falls under the exceptions to the rule:
Parties praying that this court review the factual ndings of the Court of
Appeals must demonstrate and prove that the case clearly falls under the
exceptions to the rule. They have the burden of proving to this court that a
review of the factual ndings is necessary. Mere assertion and claim that the
case falls under the exceptions do not suffice. 7 5
Petitioner claims that his case falls under the exceptions to the general rule on a
Rule 45 appeal since the ndings of the lower courts are contradicted by the evidence
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 on record. 7 6 After a careful study of the records, this Court is convinced that this case
falls under the exceptions cited in Medina, particularly in that "the inference made is
manifestly mistaken," making a Rule 45 appeal proper.

II

As a corporation, Ricarcen exercises its powers and conducts its business

through its board of directors, as provided for by Section 23 of the Corporation Code:
Section 23. The board of directors or trustees. — Unless otherwise provided
in this Code, the corporate powers of all corporations formed under this Code
shall be exercised, all business conducted and all property of such corporations
controlled and held by the board of directors or trustees to be elected from
among the holders of stocks, or where there is no stock, from among the
members of the corporation, who shall hold o ce for one (1) year until their
successors are elected and qualified.
However, the board of directors may validly delegate its functions and powers to
its o cers or agents. The authority to bind the corporation is derived from law, its
corporate by-laws, or directly from the board of directors, "either expressly or impliedly
by habit, custom or acquiescence in the general course of business." 7 7
The general principles of agency govern the relationship between a corporation
and its representatives. 7 8 Article 1317 7 9 of the Civil Code similarly provides that the
principal must delegate the necessary authority before anyone can act on his or her
behalf.
Nonetheless, law and jurisprudence recognize actual authority and apparent
authority as the two (2) types of authorities conferred upon a corporate officer or agent
in dealing with third persons. 8 0
Actual authority can either be express or implied. Express actual authority refers
to the power delegated to the agent by the corporation, while an agent's implied
authority can be measured by his or her prior acts which have been rati ed by the
corporation or whose benefits have been accepted by the corporation. 8 1
On the other hand, apparent authority is based on the principle of estoppel. The
Civil Code provides:
Article 1431. Through estoppel an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved as
against the person relying thereon.
xxx xxx xxx
Article 1869. Agency may be express, or implied from the acts of the
principal, from his silence or lack of action, or his failure to repudiate the
agency, knowing that another person is acting on his behalf without authority.
Agency may be oral, unless the law requires a specific form.
Yao Ka Sin Trading v. Court of Appeals 8 2 instructed that an agent's apparent
authority from the principal may also be ascertained through:
(1) the general manner by which the corporation holds out an o cer or
agent as having power to act or, in other words, the apparent authority with
which it clothes him to act in general, or (2) the acquiescence in his acts of a
particular nature, with actual or constructive knowledge thereof, whether within
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 or without the scope of his ordinary powers.
The doctrine of apparent authority provides that even if no actual authority has
been conferred on an agent, his or her acts, as long as they are within his or her
apparent scope of authority, bind the principal. However, the principal's liability is
limited to third persons who are reasonably led to believe that the agent was authorized
to act for the principal due to the principal's conduct. 8 3
Apparent authority is determined by the acts of the principal and not by the acts
of the agent. 8 4 Thus, it is incumbent upon Calubad to prove how Ricarcen's acts led
him to believe that Marilyn was duly authorized to represent it.

III

As the former president of Ricarcen, it was within Marilyn's scope of authority to

act for and enter into contracts in Ricarcen's behalf. Her broad authority from Ricarcen
can be seen with how the corporate secretary entrusted her with blank yet signed
sheets of paper to be used at her discretion. 8 5 She also had possession of the owner's
duplicate copy of the land title covering the property mortgaged to Calubad, further
proving her authority from Ricarcen. 8 6
The records show that on October 15, 2001, Calubad drew and issued two (2)
checks payable to Ricarcen representing the loan proceeds for the rst mortgage. The
rst check was Equitable PCI Bank check number 0024416 for P2,920,000.00 and the
second check was Equitable PCI Bank check number 0000461 for P600,000.00. Both
checks were deposited in Ricarcen's bank account with Banco de Oro, Banawe Branch,
and were honored by the drawee bank. 8 7
On December 6, 2001, Marilyn negotiated for an additional P1,000,000.00 loan
with Calubad, under the same terms and conditions. 8 8
From December 15, 2001 to April 15, 2002, Ricarcen pail and issued several
checks payable to Calubad, which he claimed were the monthly interest payments of
the mortgage loans. The following checks were drawn by Erlinda and Marilyn for
Ricarcen:
(a) Banco de Oro check number 0000067624 dated December 15, 2001 for
P120,000.00;
(b) Banco de Oro check number 0000067622 dated January 15, 2002 for
P120,000.00;
(c) Banco de Oro check number 000067626 dated February 15, 2002 for
P120,000.00;
(d) Banco de Oro check number 0000067673 dated March 6, 2002 for
P30,000.00;
(e) Banco de Oro check number 0000067625 dated March 15, 2002 for
P120,000.00;
(f) Banco de Oro check number 0000067674 dated April 6, 2002 for
P30,000.00; and
(g) Banco de Oro check number 0002422 dated April 15, 2002 for
P120,000.00. 8 9
Calubad deposited the January 15, 2002 check into his Metrobank, EDSA-
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 Caloocan Branch account, while the rest of the checks were deposited in his bank
account with Equitable PCI Bank, A. De Jesus-EDSA Branch. All the checks from
Ricarcen cleared. 9 0
For the additional loan of P2,000,000.00 obtained on May 8, 2002, Ricarcen again
issued several Banco de Oro checks dated June 15, 2002 to December 6, 2002 as
payments for this loan and its monthly interest. These checks were made to Calubad's
order and were drawn by either Erlinda or Elizabeth with Marilyn. 9 1
However, Banco de Oro check number 0082424 dated June 15, 2002 for
P120,000.00, Banco de Oro check number 0082425 dated July 15, 2002 for
P120,000.00, and Banco de Oro check number 0082426 dated August 15, 2002 for
P120,000 were all dishonored by the drawee bank for insufficiency of funds. 9 2
Calubad states that he no longer deposited the following checks from Ricarcen
upon Marilyn's request, since she claimed that Ricarcen's funds were by then
insufficient to pay the issued checks:
(a) Banco de Oro check number 0082467 dated July 6, 2002 for P30,000.00;
(b) Banco de Oro check number 0082447 dated July 8, 2002 for P60,000.00;
(c) Banco de Oro check number 0082448 dated August 8, 2002 for
P2,000,000.00;
(d) Banco de Oro check number 0082469 dated September 6, 2002 for
P30,000.00;
(e) Banco de Oro check number 0082427 dated September 15, 2002 for
P120,000.00;
(f) Banco de Oro check number 0082470 dated October 6, 2002 for
P30,000.00;
(g) Banco de Oro check number 0082428 dated October 15, 2002 for
P4,000,000.00;
(h) Banco de Oro check number 0082471 dated November 6, 2002 for
P30,000.00; and
(i) Banco de Oro check number 0082472 dated December 6, 2002 for
P1,000,000.00. 9 3
Calubad could not be faulted for continuing to transact with Marilyn, even
agreeing to give out additional loans, because Ricarcen clearly clothed her with
apparent authority. Likewise, it reasonably appeared that Ricarcen's o cers knew of
the mortgage contracts entered into by Marilyn in Ricarcen's behalf as proven by the
issued Banco De Oro checks as payments for the monthly interest and the principal
loan.
Ricarcen claimed that it never granted Marilyn authority to transact with Calubad
or use the Quezon City property as collateral for the loans, but its actuations say
otherwise. It appears as if Ricarcen and its o cers gravely erred in putting too much
trust in Marilyn. However, Calubad, as an innocent third party dealing in good faith with
Marilyn, should not be made to suffer because of Ricarcen's negligence in conducting
its own business affairs. This finds support in Yao Ka Sin Trading: 9 4
Also, "if a private corporation intentionally or negligently clothes its o cers or
agents with apparent power to perform acts for it, the corporation will be
estopped to deny that such apparent authority is real, as to innocent third
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 persons dealing in good faith with such officers or agents." 9 5

IV

Nonetheless, petitioner's prayer for the award of damages must be denied for
failing to provide factual or legal basis for the award.
Moral damages are not automatically awarded when there is a breach of
contract. It must also be proven that the party who breached the contract acted
fraudulently or in bad faith, in wanton disregard of the contracted obligation. 9 6 In
addition, the following conditions must be met before moral damages may be
awarded:
(1) first, there must be an injury, whether physical, mental or psychological,
clearly sustained by the claimant; (2) second, there must be culpable act or
omission factually established; (3) third, the wrongful act or omission of
the defendant is the proximate cause of the injury sustained by the
claimant; and (4) fourth, the award of damages is predicated on any of the
cases stated in Article 2219 of the Civil Code. 9 7 (Emphasis supplied)
Petitioner failed to allege that Ricarcen acted fraudulently or wantonly when it
breached the loan and mortgage contract. Neither is this Court convinced that fraud,
bad faith, or wanton disregard of its obligation can be imputed to Ricarcen due to its
bad business judgment and negligence in putting too much trust in Marilyn. It was not
su ciently shown that Ricarcen was spurred by a dishonest purpose or was motivated
by ill will or fraud when it assailed the contract entered into by Marilyn and Calubad.
In the same manner, exemplary damages 9 8 cannot be awarded in the absence of
evidence that Ricarcen acted fraudulently or wantonly. Finally, in the absence of
exemplary damages, attorney's fees, and costs of suit also cannot be recovered. 9 9
WHEREFORE , the Petition is Granted . The assailed January 25, 2012 Decision
and June 20, 2012 Resolution of the Court of Appeals in CA-G.R. CV No. 93185 are
REVERSED and SET ASIDE . Ricarcen Development Corporation's Amended
Complaint in Civil Case No. Q-03-50584 before Branch 218, Regional Trial Court,
Quezon City is hereby DISMISSED for lack of merit.
SO ORDERED.
Velasco, Jr., Bersamin, Martires and Gesmundo, JJ., concur.
Footnotes

1. Yao Ka Sin Trading v. Court of Appeals , 285 Phil. 345, 367 (1992) [Per J. Davide., Jr., Third
Division].

2. Rollo, pp. 9-54.

3. Id. at 113-130. The Decision was penned by Associate Justice Elihu A. Ybañez and concurred
in by Associate Justices Celia C. Librea-Leagogo and Danton Q. Bueser of the
Seventeenth Division, Court of Appeals, Manila.
4. Id. at 132-133.

5. Id. at 106-111. The Decision was penned by Judge Hilario L. Laqui.

6. Id. at 114.
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 7. Id. at 68-70.
8. Id. at 114.

9. Id.
10. Id. at 74-77.

11. Id. at 75.

12. Id.

13. Id. at 78-80.

14. Id. at 81-83.

15. Id. at 98.

16. Id. at 99.

17. Id. at 100.

18. Id. at 116.

19. Id. at 84.

20. Id. at 117.

21. Id.
22. Id. at 117-118.

23. Id. at 118.

24. Id.
25. Id. at 118-119.

26. Id. at 119.

27. Id. at 102.

28. Id. at 106-111.

29. Id. at 108-109.

30. Id. at 109.

31. Id. at 110.

32. Id. at 110-111.

33. Id. at 123-124.

34. Id. at 124.

35. Id. at 127-128.

36. Id. at 128.

37. Id. at 129.

38. Id. at 9-54.

CD Technologies Asia, Inc. 2018 cdasiaonline.com
 39. Id. at 30-37.

40. Id. at 38-45.

41. Id. at 45-51.

42. Id. at 31-33.

43. Id. at 98.

44. Id. at 32.

45. Id. at 99.

46. Id. at 100.

47. Id. at 33-36.

48. Id. at 36.

49. Id. at 38.

50. Id. at 39-40.

51. Id. at 40-42.

52. Id. at 42-43.

53. Id. at 44.

54. Id. at 45-47.

55. Id. at 49-50.

56. Id. at 135-136.

57. Id. at 141-157.

58. Id. at 141-142.

59. Id. at 147-148.

60. Id. at 148.

61. Id. at 150-151.

62. Id. at 151-152.

63. Id. at 154-155.

64. Id. at 159.

65. Id. at 171-188.

66. Id. at 171.

67. Id. at 172-173.

68. Id. at 193.

69. RULES OF COURT, Rule 45, sec. 6.

70. RULES OF COURT, Rule 45, sec. 1 provides:

CD Technologies Asia, Inc. 2018 cdasiaonline.com
     Section 1. Filing of petition with Supreme Court. — A party desiring to appeal by
certiorari from a judgment or nal order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law,
may le with the Supreme Court a veri ed petition for review on certiorari. The petition
shall raise only questions of law which must be distinctly set forth.
71. Quintos v. Nicolas, 736 Phil. 438, 451 (2014) [Per J. Velasco, Third Division].

72. 269 Phil. 225 (1990) [Per J. Bidin, Third Division].

73. Id. at 232.

74. G.R. No. 171722, January 11, 2016, 778 SCRA 189 [Per J. Leonen, Second Division].
75. Id. at 207 citing Borlongan v. Madrideo , 380 Phil. 215, 223 (2000) [Per J. De Leon, Jr.,
Second Division].

76. Rollo, pp. 172-173.

77. People's Aircargo and Warehousing Co., Inc. v. Court of Appeals , 357 Phil. 850, 863 (1998)
[Per J. Panganiban, First Division].
78. University of Mindanao, Inc. v. Bangko Sentral ng Pilipinas , 778 SCRA 458, 500, G.R. Nos.
194964-65, January 11, 2016 [Per J. Leonen, Second Division].
79. CIVIL CODE, art. 1317 provides:

  Article 1317. No one may contract in the name of another without being authorized by
the latter, or unless he has by law a right to represent him.
80. Banate v. Philippine Countryside Rural Bank (Liloan, Cebu), Inc. , 639 Phil. 35, 45-46 (2010)
[Per J. Brion, Third Division].
81. Id. at 45-46.

82. 285 Phil. 345, 367 (1992) [Per J. Davide, Jr., Third Division].
83. Banate v. Philippine Countryside Rural Bank (Liloan, Cebu), Inc. , 639 Phil. 35, 47 (2010) [Per
J. Brion, Third Division].
84. Id.

85. Rollo, p. 125.

86. Id. at 38.

87. Id. at 39.

88. Id. at 78-80.

89. Id. at 174-175.

90. Id. at 175.

91. Id. at 175-177.

92. Id. at 175-176.

93. Id. at 175-177.

94. 285 Phil. 345 (1992) [Per J. Davide, Jr., Third Division].
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 95. Id. at 367.
96. Philippine Savings Bank v. Spouses Castillo , 664 Phil. 774, 786 (2011) [Per J. Nachura,
Second Division].

97. Francisco v. Ferrer, Jr., 405 Phil. 741, 749-750 (2001) [Per J. Pardo, First Division].
98. CIVIL CODE, art. 2232 provides:
  Article 2232. In contracts and quasi-contracts, the court may award exemplary damages
if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent
manner.
99. CIVIL CODE, art. 2208 provides:

    Article 2208. In the absence of stipulation, attorney's fees and expenses of litigation,
other than judicial costs, cannot be recovered, except:
  (1) When exemplary damages are awarded;

    (2) When the defendant's act or omission has compelled the plaintiff to litigate with
third persons or to incur expenses to protect his interest;

  (3) In criminal cases of malicious prosecution against the plaintiff;

  (4) In case of a clearly unfounded civil action or proceeding against the plaintiff;

  (5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiff's plainly valid, just and demandable claim;

  (6) In actions for legal support;

    (7) In actions for the recovery of wages of household helpers, laborers and skilled
workers;

    (8) In actions for indemnity under workmen's compensation and employer's liability
laws;

  (9) In a separate civil action to recover civil liability arising from a crime;
  (10) When at least double judicial costs are awarded;

  (11) In any other case where the court deems it just and equitable that attorney's fees
and expenses of litigation should be recovered.

CD Technologies Asia, Inc. 2018 cdasiaonline.com